The row rocked the coalition just as speculation grows that SNS, the biggest party in parliament and riding high in the polls, will quit the government and try to force an early election.

The Serbian daily Informer and the respected broadcaster B92 cited police reports that Dacic had twice met suspected drug boss Rodoljub Radulovic in late 2008, when Dacic was interior minister in a previous coalition government.

Dacic is also interior minister in the current six-month-old government, which has set its sights on opening membership talks with the European Union this year.

Informer wrote that aides to the prime minister had not denied that the meetings took place, but had said Dacic was not aware at the time that Radulovic was suspected of any wrongdoing.

A senior official in Dacic's Socialist Party (SPS), speaking to Reuters, declined to confirm or deny the meetings, but accused coalition partners in the nationalist Serbian Progressive Party (SNS) of trying to smear Dacic.

Speculation has been brewing for weeks that the SNS, led by Defense Minister Aleksandar Vucic, wants an election this year.

"We need to act," the senior Socialist official told Reuters. "Vucic and his allies want to smear us and Dacic, and we cannot remain silent. Not this time. Whether the government collapses, that's for Vucic and Dacic to decide."

Other aides to Dacic were not immediately available.

A senior SNS official declined to comment on the accusations of a smear campaign, but told Reuters:

"Early next week the SNS presidency will meet to decide future steps. Clearly, elections will be on the agenda. However, our key goal is to secure a date for EU accession talks, which we expect to get in March. Then we'll see."

Besides being defense minister, Vucic is also deputy prime minister in charge of security matters. He has been leading a government crackdown on organized crime and corruption, a condition of Serbia's bid to join the EU.

Vucic and Dacic have been at odds for weeks over whom to appoint to the helm of the Serbian police force, a powerful political lever since the rule of late Serbian strongman Slobodan Milosevic.

The Politika broadsheet carried a similar report on Saturday, citing police sources.

Both Radulovic, known as Misha Banana or Misha America, and Saric are at large. The Politika report said they were suspected of involvement in the smuggling of two tonnes of cocaine from South America to Spain in 2009.

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